GENIUS Act Stablecoin Regulation 2026: Treasury Department Proposal and Small Issuer Compliance Path Analysis

On April 1, 2026, the U.S. Department of the Treasury officially issued the first proposed rulemaking notice (NPRM) for the “Guiding and Establishing the American Stablecoin National Innovation Act” (GENIUS Act), marking the beginning of the rulemaking and implementation phase for this landmark stablecoin legislation that was signed into law in July 2025.

The core task of this NPRM is to establish a set of “general principles” to determine whether state-level stablecoin regulatory regimes are “substantially similar” to the federal regulatory framework. This standard of judgment directly determines whether payment stablecoin issuers with an asset size below $10 billion can opt for a state-level regulatory pathway instead of being directly incorporated into the federal comprehensive regulatory system.

The Treasury has initiated a 60-day public comment period, during which industry participants, regulators, and other stakeholders may submit feedback after the notice is officially published in the Federal Register. As the first Treasury rule proposal in the implementation process of the GENIUS Act, its final version is expected to have a structural impact on the landscape of the U.S. stablecoin market.

The Regulatory Path Divide: Legislative Timeline and Rulemaking Process

The legislative process for the GENIUS Act began with the introduction of a bill in the Senate on May 1, 2025. On June 17 of the same year, the Senate passed it with 68 votes to 30, and the House approved it on the same day with 308 votes to 122. On July 18, the President signed it into law.

After enactment, the Treasury issued its first round of comments in August 2025 on digital forensic tools and stablecoin-related topics. In September, it also released an Advance Notice of Proposed Rulemaking, broadly soliciting opinions on implementation details, taxation, and information collection issues.

In 2026, the rulemaking process significantly accelerated. In February, the Office of the Comptroller of the Currency (OCC) published an independent NPRM. On April 1, the Treasury formally released its first GENIUS Act NPRM; concurrently, the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA) are advancing their respective rulemaking efforts.

According to the implementation timetable set by the legislation, the final rules are expected to take effect around November 2026—i.e., 18 months after the GENIUS Act was signed, or 120 days after the major regulators complete their rulemaking, whichever is earlier. This means stablecoin issuers are likely to see a comprehensive federal and state regulatory framework by late 2026 or early 2027.

The Technical Core of the Dual-Track System: The $10 Billion Threshold and the “Substantially Similar” Standard

The GENIUS Act establishes a dual-regulation framework for payment stablecoin issuers. All issuers must adhere to core federal standards: maintaining a 1:1 reserve supported by high-liquidity assets, redeeming on demand at face value, complying with the Bank Secrecy Act (BSA)/AML regulations and sanctions, and disclosing reserve reports monthly.

Regarding jurisdiction, Section 4© of the act permits “state-qualified issuers” to choose state regulation, provided that the state’s regulatory framework is certified by the Treasury as “substantially similar” to the federal framework. However, this option is only available to issuers with total outstanding issuance not exceeding $10 billion. Once exceeding this threshold, issuers must transition to federal regulation, or obtain federal approval to remain under state regulation, or cease issuance.

The Treasury’s NPRM further clarifies the criteria for “substantially similar,” distinguishing two categories of requirements:

Additionally, states may impose extra regulatory requirements, provided they do not conflict with federal law and do not diminish the overall similarity.

The $10 billion threshold embodies a layered regulatory philosophy: smaller issuers are considered lower risk and less impactful on financial stability, thus allowed to remain under state regulation; larger issuers, due to systemic importance, must be under federal oversight. This design aims to preserve innovation in state regulation while providing a clear “upgrading” pathway as issuers grow.

However, the rigidity of this threshold may pose issues. As issuers approach the $10 billion mark, they might proactively limit issuance to avoid triggering federal regulation, potentially suppressing natural market growth.

Public Discourse: Industry Core Controversies and Divergences

The NPRM has elicited industry opinions mainly along these lines:

1. Concerns over the practicality of the state regulation pathway

State regulators, such as the Conference of State Bank Supervisors (CSBS), have expressed initial concerns that the Treasury’s interpretation of “substantially similar” may be overly strict, risking that many state regimes will be deemed ineligible, thus forcing small issuers into the more costly federal regulatory system prematurely.

2. Expectations for clearer rule standards

Industry participants generally hope the Treasury will specify more quantitative criteria for “substantially similar” in the final rules, rather than relying on broad principles. Lack of clear definitions could increase compliance complexity and uncertainty for multi-state operators.

3. Challenges in multi-agency regulation coordination

Currently, OCC, FDIC, and NCUA are each advancing rulemaking within their jurisdictions. While parallel efforts can facilitate specialization, they may also lead to overlapping regulations or conflicts, requiring issuers to comply with multiple federal agencies simultaneously.

4. The legislative gap for yield-bearing stablecoins

Notably, the GENIUS Act does not address guidance for yield-bearing stablecoins. This omission has become a major obstacle in Congress’s efforts to pass broader market-structure legislation, often called the Clarity Act.

Narrative Analysis of the “Substantially Similar” Standard

The Treasury’s NPRM anchors the “substantially similar” assessment to OCC’s published rules and interpretations. The document explicitly states that the federal baseline largely references OCC’s framework for non-bank stablecoin issuers.

This narrative choice warrants in-depth analysis. By using OCC’s standards as the benchmark, it effectively grants OCC a central role in the stablecoin regulatory system. Although the act assigns regulatory responsibilities across multiple agencies, the technical benchmark for “substantially similar” makes OCC standards the primary yardstick for evaluating state regimes.

The rationale is: only with a clear, operational federal baseline can the “similarity” of state regimes be meaningfully compared. Conversely, this raises a reverse concern: if OCC’s standards are still under development (its NPRM is not expected until February 2026), then the “substantially similar” judgment may lack a firm reference point at present.

During the 60-day comment period, substantial feedback is expected to request further clarification of the federal baseline or the establishment of a more flexible multi-agency coordination mechanism. The final rules may incorporate some of these suggestions, but the core framework—anchored on OCC standards—will likely remain intact.

Industry Impact Analysis: Who Benefits and Who Faces Pressure

As of April 1, 2026, the global stablecoin market size is approximately $310 billion, with 391 tokens. Tether (USDT) has a market cap of about $184 billion, and USDC about $77 billion—both well above the $10 billion threshold.

For large issuers (exceeding $10 billion): stablecoins like USDT and USDC can no longer choose a state pathway and must be regulated directly under federal agencies. This entails meeting all federal compliance standards, including stricter capital requirements, annual GAAP financial audits (performed by registered public accounting firms), and monthly reserve reports certified by CEOs/CFOs. Compliance costs will rise significantly, but they gain regulatory certainty at the federal level, facilitating deeper cooperation with traditional financial institutions.

For mid- and small-sized issuers (below $10 billion): these entities gain strategic flexibility. Remaining under state regulation can offer a more adaptable environment, especially regarding capital and reserve management; however, their state’s regime must be certified as “substantially similar.” Currently, mature regimes like New York State (NYDFS framework) have a high likelihood of certification, while less developed regimes face challenges.

For state regulators: the NPRM effectively initiates a “regulatory competition.” States will evaluate their regimes’ gaps relative to federal standards and adjust during the comment period or afterward. States successfully obtaining Treasury certification will attract more stablecoin projects, boosting tax revenue and employment.

For federal regulators: the roles of OCC, FDIC, and NCUA are further reinforced. Multi-agency coordination will become the norm for stablecoin regulation, and rule consistency among agencies will directly influence market efficiency.

Multi-Scenario Evolution Forecast

Based on current NPRM content and industry feedback, three potential scenarios are envisioned:

1. Lenient Coordination Path

The Treasury adopts industry feedback, interpreting “substantially similar” more leniently, allowing more state regimes to qualify. It establishes a federal-state coordination mechanism, providing a “one-stop” compliance channel for cross-state operations. The final rules are expected to take effect as scheduled in November 2026.

→ Under this scenario, mid- and small-sized issuers have broader options, state regimes continue to operate and improve, and overall compliance costs remain manageable.

2. Strict Uniform Path

The Treasury maintains a strict interpretation of “substantially similar,” resulting in most state regimes being deemed ineligible. Issuers below $10 billion face limited options, likely moving toward federal regulation or partnering with large financial institutions. Implementation may be delayed until early 2027.

→ This could accelerate industry consolidation, squeeze out smaller issuers, but promote a more uniform federal standard beneficial for market stability.

3. Legislative Supplementation Path

During the comment period, Congress advances broader market legislation, such as the Clarity Act, addressing issues like yield-bearing stablecoins not covered by the GENIUS Act. This legislation could influence the final rules, potentially delaying rule issuance until late 2027.

→ The market would face prolonged uncertainty, complicating compliance planning, but the eventual regulatory framework would be more comprehensive.

Conclusion

The U.S. Department of the Treasury’s release of the GENIUS Act NPRM signifies a substantial shift from legislative blueprint to actionable regulation for stablecoins. The $10 billion threshold and the “substantially similar” standard form the two pillars of the dual-regulation system, and their final definitions will profoundly influence the competitive landscape.

The 60-day public comment period is a crucial window for industry stakeholders to participate in rulemaking. From regulators to issuers, from compliance providers to end users, every feedback piece could shape the final rules. Whether the outcome favors flexible coordination or strict uniformity, one clear message is already evident: the U.S. stablecoin regulatory framework is accelerating toward realization, and industry participants should prepare strategically in advance.